Promise around Eli Lilly’s expected obesity drug, great earnings adds some $60 billion in market cap

Eli Lilly (LLY) on Tuesday very likely topped Wall Street’s second-quarter estimates for earnings and sales. The star of the show, once again, is Mounjaro, the diabetes treatment that could lickety-split be cleared by regulators for weight loss as well. The promise of Mounjaro to combat obesity, and possibly other conditions, snatched the stock to an all-time high and added more than $60 billion of market value. Revenue for the three months ended June 30 knoll 28% year-over-year to $8.31 billion, far outpacing the $7.58 billion expected by analysts, according to Refinitiv. (When excluding one-time divestment contributions and behind year’s Covid antibody revenue, Lilly’s sales rose 22% on an annual basis.) Adjusted earnings per piece of $2.11 beat the $1.98 consensus estimate and exceeded last year’s second-quarter EPS by nearly 69%. Bottom true Club name Eli Lilly not only reported a stellar second quarter but got a lift to its long-term prospects in the form of new details on a diabetes and weight-loss drug from competitor Novo Nordisk (NVO). Lilly’s multiyear outlook, led by Mounjaro, appears equable brighter, and the company is making wise investments to support that growth. Novo Nordisk’s trial results re a reduction of the risk of some cardiovascular problems — discussed in greater detail later in this story — are expected to nourish the health-insurance reimbursement case for obesity drugs like its Wegovy and Lilly’s Mounjaro . Getting broad reimbursement has protracted been seen as crucial for those drugs to reach their full commercial potential. As a reminder: Wegovy is already approved by U.S. regulators for grossness, while Mounjaro is expected to gain that additional approval by year-end. Mounjaro — which currently is only cleared as behaving type-2 diabetes — showed impressive momentum in the second quarter, with sales reaching $980 million. That pulverized Wall Street’s estimates by more than $200 million and narrowly exceeded what analysts projected for the third domicile. Together, these developments further support Jim Cramer’s contention that Mounjaro will become the best-selling anaesthetize of all time , assuming U.S. regulators expand its use to include obesity. “I reiterate that’s exactly what’s happening,” Jim said Tuesday morning. Eli Lilly rations soared more than 16% to a new all-time high during Tuesday’s session. We maintain our 2 rating , meaning we don’t covet to chase it up and would wait for a pullback before adding to our position. Our $460 price target is under review. LLY YTD mountain Eli Lilly’s keep accumulate performance so far in 2023. Guidance For the second straight quarter, Eli Lilly raised its full-year sales and adjusted earnings attitude. The Indianapolis-based drugmaker now sees 2023 revenue between $33.4 billion to $33.9 billion, up from its prior instruction between $31.2 billion and $31.7 billion. The midpoint of the new forecast — $33.65 billion — is about 7% above Exasperate Street’s full-year sales estimate, according to FactSet. Eli Lilly said roughly two-thirds of the $2.2 billion gross income guidance increase is tied to the previously announced sale of the commercial rights for antipsychotic Zyprexa , which were won by German firm Cheplapharm — and the divestment of Baqsimi , a nasal spray used to treat low blood sugar, to Amphastar Pharmaceuticals. The uneaten $700 million increase to the revenue guidance reflects “strong underlying business performance,” Lilly said. Eli Lilly now foresees adjusted earnings per share between $9.70 and $9.90, up significantly from the old guidance between $8.65 and $8.85. Mad Street expected adjusted full-year EPS of $8.73, per FactSet. The company also raised its marketing, selling and administrative expense opinion, which now stands between $7.2 billion and $7.4 billion for 2023. That’s up from between $7 billion and $7.2 billion. Lilly’s cash chief Anat Ashkenazi said on the post-earnings call that the increase is tied to commercial product launches slated for later this year. Additionally, Lilly commanded research and development costs are expected to fall within the range of $8.9 billion and $9.1 billion, up from between $8.3 billion and $8.5 billion. The skip in R & D spending is related to additional clinical trials to support their next-generation products, Ashkenazi said. Overall, she translated, Lilly sees a “tremendous opportunity for continued investment in a very successful pipeline.” Second-quarter commentary Mounjaro’s better-than-expected on the blocks were the highlight of Eli Lilly’s report. The call offered even more encouraging information — most notably, that think up has begun at the company’s North Carolina facility to increase the supply of Mounjaro. Over the next few months, “unprecedented demand” for the medicine is likely to still cause sporadic shortages, acknowledged the president of Lilly Diabetes, Michael Mason. But as production in North Carolina declivities up, Mason said the expectation is that will help eliminate supply constraints. Management also expressed fulfilment with the growth of daily type-2 diabetes pill Jardiance and breast-cancer treatment Verzenio. Second-quarter sales of Jardiance prominence 45% year over year to $668.3 million, topping the $627 million expected by analysts. Verzenio net income increased by 57.5% to $926.8 million, compared with estimates of $911 million. The one key product to miss quarterly vendings expectations was Trulicity, a type-2 diabetes treatment that some patients stop taking in favor of Mounjaro. Trulicity saw second-quarter rummage sales of $1.81 billion, down 5% year over year and short of the $2.04 billion projected by analysts. Lilly imputed the weakness to lower realized prices both in the U.S. and internationally. Addressing concerns about cannibalization, Mason said with reference to 13% to 14% of patients on Mounjaro switched from Trulicity, roughly the same since Mounjaro launched in June 2022. Repercussions of Novo study In a much-anticipated study , which we’ve previewed several times, Danish firm Novo Nordisk on Tuesday intended its weight-loss therapy Wegovy cut the risk of a major cardiovascular event, such as strokes and heart attacks, by 20% in treatment recipients compared with those who took the placebo. The late-stage trial, known as the Select study, involved with respect to 17,600 people aged 45 and older with no history of diabetes who are overweight or obese and have cardiovascular condition. Investors in Novo and Eli Lilly had been awaiting the Select study’s results, in hopes that favorable results could reinforce the commercial future for the companies’ expensive GLP-1 drugs, which include both Wegovy and Mounjaro. The thinking has been that if GLP-1 group therapies can demonstrate an ability to not only cause patients to lose weight but improve other health outcomes, there’s a less ill argument for insurance companies to more broadly cover the drugs for obesity indications. Indeed, that’s what we got Tuesday. Mason, Lilly’s be in of diabetes, said health insurers are unlikely to immediately start covering GLP-1s for obesity in light of the Select culminates. That may take more time. But the results are “great for the anti-obesity medication class,” and they should help over b draft greater emphasis to the overall health benefits that weight loss can provide, he added. For its part, Eli Lilly is also meditate oning Mounjaro’s impact on other health outcomes including cardiovascular events. The company has a late-stage trial involving patients with type-2 diabetes that’s estimated to be culminated in October 2024. — Programming note: Eli Lilly CEO David Ricks will be a guest on Tuesday evening’s “Mad Money.” (Jim Cramer’s Benevolent Trust is long LLY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you ordain receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade signal before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after discharging the trade alert before executing the trade. 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